US New Home Sales Plunge in March; price spike

Construction of residential single family homes by KB Home is under construction in the community of Valley Center, California, U.S., June 3, 2021. REUTERS/Mike Blake/File Photo

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WASHINGTON, April 26 (Reuters) – Sales of new single-family homes in the United States fell in March as soaring mortgage rates and prices reduced affordability, but the housing market remains supported by an acute shortage of properties previously held.

Sales of new homes plunged 8.6% to a seasonally adjusted annual rate of 763,000 units last month, the Commerce Department said Tuesday. The February sales pace was revised up to 835,000 units from the previously reported 772,000 units.

Sales fell in all four regions. New homes are a leading indicator of the housing market as they are counted when a contract is signed, and can also offer an early read on the impact of rising mortgage rates on housing demand.

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Economists polled by Reuters had forecast new home sales, which make up a small share of U.S. home sales, to fall to a rate of 765,000 units. Sales fell 12.6% year-on-year in March. They peaked at a rate of 993,000 units in January 2021, which was the highest since late 2006.

The 30-year fixed-rate mortgage averaged 5.11% in the week ended April 21, the highest since April 2010 and up from 5.00% the previous week, the data showed. of the Freddie Mac mortgage financing agency.

The Federal Reserve raised its benchmark rate by 25 basis points last month, the first rate hike in more than three years, as the U.S. central bank battles soaring inflation. Economists expect the Fed to raise rates by 50 basis points next week and soon begin trimming assets.

But with a near-record stock of homes already owned, economists believe rising borrowing costs will have a moderate impact on the new housing market. Last week’s data showed sales of previously owned homes fell to their lowest level in nearly two years in March.

The median price of new homes in March jumped 21.4% from a year ago to $436,700. Almost all homes sold in the past month were above the $200,000 price level. Strong house price growth is expected to continue through this year and into 2023.

There were 407,000 new homes on the market, down from 392,000 units in February. Houses under construction represented 65.5% of the inventory, with houses to be built representing approximately 25.8%.

The backlog of homes approved for construction but not yet started is at an all-time high as builders grapple with shortages and higher prices for inputs like framing lumber, as well as cabinets, garage doors, counters and appliances.

At the pace of March sales, it would take 6.4 months to eliminate the supply of homes on the market, compared to 5.6 months in February.

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Reporting by Lucia Mutikani Editing by Paul Simao

Our standards: The Thomson Reuters Trust Principles.

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